When news regarding “internet sales tax” broke in May 2013, many thought the issue would be decided by the end of that year: either the Federal Government would grant states the authority to tax sales made by certain remote sellers, or Legislators would reject the idea and the case would be closed. Instead, 2013 closed with no action.

2014 came and went without any real action on the issue at the Federal level. Three new pieces of Remote Sales Tax Legislation were passed around Washington at the start of 2015: Marketplace Fairness Act of 2015 (MFA), Online Sales Simplification Act, Remote Transactions Parity Act, but they never went anywhere.

In the absence of a Federal solution to an issue that has been draining sales tax revenue from states, states are creating Remote Sales Tax Legislation of their own. If Federal Legislators do not deal with this issue, the United States Supreme Court could take it on. Indeed, there is talk at the State level of the need to kill Quill, a reference to the 1992 Supreme Court case Quill Corp. v. North Dakota, which upheld an earlier ruling that a State cannot tax sales by vendors lacking substantial nexus in that state.

MHD: I was part of that case.

In order for the Customs Enforcement bill, that also permanently bans State and Local taxes on internet access to “get unstuck and make it to President Obama’s desk, “Senate Majority Leader Mitch McConnell had to promise online sales backers a vote.”
Long-time remote sales tax proponent Sen. Lamar Alexander (R-Tenn.) told reporters, “I think the chances are very good that the House will consider and pass a Marketplace Fairness Act, and that the Senate will as well. And if we don’t, I can predict exactly what is going to happen. Governors and States are going to start suing companies all over the country who are not collecting taxes that are owed. And when that happens, those companies are going to rush to Congress and pass the Marketplace Fairness Act.”

Remote sales tax proponents like Sen. Alexander and Rep. Jason Chaffetz (R-Utah) are feeling optimistic about McConnell’s promise and the fact that MFA opponent Sen. Ron Wyden (D-Ore.) has promised he won’t “use any procedural maneuvers to hold up an Online Sales Tax bill.” Yet their optimism should be tempered. The office of House Speaker Paul Ryan has “given no guarantees and set no timelines about voting on an Online Sales Tax bill this year.”

While Congress debates over the MFA and other proposed Legislation, State Governments are focusing on nexus rules that will impact many remote sellers.

Alabama - Already instituted new requirements for remote sellers. It expects this rule will be challenged, and it is prepared to go all the way to the Supreme Court to fight it. Vote in 2016 promised on the Internet Sales Tax bill.

Illinois - Shell bill titled “Creates the Marketplace Fairness Act.”

Kansas - Requires the State to inform individuals of their obligation to remit the sales tax on remote purchases.

Louisiana Presumes sales tax nexus if a seller uses an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales. Requires remote sellers to provide notice to instate purchasers that the Louisiana sales tax may be due at the time of purchase.

Massachusetts - Authorizes State taxing authorities to collect sales tax from remote sellers and reduce the sales tax rate to 5.75 percent. Authorizes State taxing authorities to collect sales tax from remote sellers in anticipation of Federal action on this subject. Changes the definition of “engaged in business in the commonwealth” to include having an in-state intermediary perform certain services on the vendor’s behalf, including: regularly soliciting sales within the state, maintaining storage or distribution facilities, or facilitating the deliver or repair of sold property. Authorizes State taxing authorities to collect sales tax from remote sellers in anticipation of Federal action on this subject.

Mississippi - Revises the definition of “retailer,” “retail sale,” and “doing business” for the purposes of the sales tax.

Nebraska - Presumes sales tax nexus either if any one of several criteria are met, including: a seller using an in-state affiliate to facilitate their operations, utilizing an in-state marketplace provider, or having cumulative sales into the State in excess of $10,000 in the previous year.

Ohio - Presumes sales tax nexus if a seller utilizes an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales.

Oklahoma - Presumes sales tax nexus if a seller utilizes an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales. Specifically requires all remotes sellers to collect and remit the State sales tax if they have in-state gross annual receipts in the State in excess of $1 million.

Rhode Island - Changes the definition of “retailer” to specify that referring customers to a retailer only through a link on a website does not constitute nexus for purposes of the sales tax. Presumes sales tax nexus either if any one of several criteria are met, including: a seller using an in-state affiliate to facilitate their operations, utilizing an in-state marketplace provider, or having cumulative sales into the State in excess of $10,000 in the previous year.

South Dakota - Stipulates that an out-of-state seller has nexus with the State for sales tax purposes if their gross revenue from sales into the State exceeds $100,000 in the previous year or if they engaged in 200 or more separate transactions.

Utah - Presumes sales tax nexus if a seller utilizes an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales. Requires the owner of every in-state selling platform to file an annual report with the State of each seller who uses the platform, but does not collect the sales tax. Creates a rebuttable presumption that a seller of goods or services has nexus if they have in-state affiliates who facilitate the delivery, installation, assembly, maintenance of their sales; if the affiliate shares management, business system, or employees with the seller; of if the affiliate and the seller share intercompany transactions.

Washington - Repeals the nonresident sales and use tax exemption. Prohibits the State from considering the attendance at a single in-state trade convention per year sufficient to establish nexus with the state.











NYC Wins When Everyone Can Vote! Michael H. Drucker